A Decentralized IoT Payment Service for Digital Currencies
Uwe A. Kuehn · 2025
Cryptocurrencies and blockchain technologies are well developed for default transactions between human stakeholders exchanging crypto values. Currently, a plethora of approximately 13,000 cryptocurrencies exists, many of which are implemented using variations of blockchain. However, blockchain technology has limitations, e.g., with respect to high-frequency near real-time transactions. These real-time transactions are necessary for micro-payments in IoT involving machine-to-machine payment services. In this paper we analyze how blockchain performs under heavy loads of large numbers of on-chain transactions over short periods of time. We show that these high-frequency transactions are not completed fast enough but stay in a pending state for several seconds, which is problematic. To remedy this problem we analyzed alternative solutions that allow high-frequency coin exchange and data transfer between the stakeholders with the same security guarantees as on-chain transactions. We found that payment state channels are expedient as a high-frequency micropayment solution and we utilized the Perun framework in our solution. We propose a Payment Service Layer which uses an internal secure solid-state channel, i.e., the micro-transactions are valid on-chain transactions but have not yet been sent to the underlying blockchain. Our solution exhibits payment channels using smart contracts and state channels as a secure and fast payment service. We evaluated the throughput of our prototype in an environment of IoT devices with limited resources and show that our solution works even in resource-constrained settings. We show that transferring the same amount of digital coins using off-chain instead of on-chain transactions reduces network traffic in the blockchain network.